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Debt Securities

African Finance Corp. issues $750 million 7-year Eurobond at lowest yield to date

Africa Finance Corporation has successfully issued a Eurobond at its lowest yield to date.

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Treasury Market T-bills, African Finance Corp. issues $750 million 7-year Eurobond at lowest yield to date

The Lagos based, Pan-African multilateral development financial institution, African Finance Corporation (AFC), has successfully issued a Eurobond at its lowest yield to date.

This is an indication of robust global investor interest in the African continent and the development financial institution which is dedicated to infrastructure financing and investment across key sectors in the continent.

This disclosure is contained in a press statement issued by AFC a few days ago.

READ: AFC acquires $200 million, $100 million credit facility

According to the statement from AFC, the US$750 million 2.875% 144a/ Reg S Notes, which is due in 2028 was priced at 175 bps over US Treasuries to yield 2.991% adding that the Corporation has progressively reduced its funding cost on the dollar benchmark issuances with a shorter-dated 5-year US$700 million Eurobond in 2020 at 3.250%, a 10-year US$500 million Eurobond in November 2019 at 3.895% and a 7-year US$650 million Eurobond in June 2019 at 4.500%.

AFC is focused on bridging Africa’s large infrastructure deficit by financing projects that have high developmental impact on the economies of African countries. The final order book was 3.5 times oversubscribed at approximately US$2.6 billion, with funds coming from more than 200 investors, across the UK (32%), Continental Europe (23%), Middle East (22%), Asia (13%), and the US/Americas (10%).

What the President/CEO of AFC is saying

The President/CEO of AFC, Samaila Zubairu, said, “This reflects investor confidence in AFC’s mandate and investment strategy, which is particularly critical at a time when the COVID-19 pandemic has challenged Africa’s development.

“AFC will continue to mobilize capital for investments to accelerate sustainable development impact with a greater focus on reducing Africa’s energy deficit and job creation challenges through climate-resilient infrastructure, energy transition and other projects driving Africa’s economic recovery post-COVID.”

This is the sixth Eurobond under AFC’s US$5 billion Global Medium-Term Note programme, which is rated A3 by Moody’s Investors Service.

The AFC is expected to use proceeds from the bond to continue investing in critical infrastructure that delivers on its long-term vision to drive social, economic and sustainable change across Africa.

READ: CIBN: Our economic challenges are of a global dimension – Emefiele

Senior Director & Treasurer of AFC, Banji Fehintola, said:

This successful issuance follows a year of severe market disruption exacerbated by the COVID-19 pandemic. The appetite and pricing are an endorsement of the Corporation’s long-term prospects and reflects our strong credit profile and established market presence. We are also delighted with the strong demand from a diverse pool of accounts, which has further diversified our funding sources.”

The bond issuance was arranged by BofA Securities, First Abu Dhabi Bank, Goldman Sachs International, J.P. Morgan and MUFG as Joint Bookrunners with White & Case, Clifford Chance and Aluko & Oyebode as legal advisers.

What you should know

The AFC, which was established in 2007 by sovereign African states to provide pragmatic solutions to Africa’s infrastructure deficit and challenging operating environment, bridges the infrastructure investment gap through the provision of debt and equity finance, project development, technical and financial advisory services.

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The corporation focuses its investments across 5 key sectors which include Power, Transport and Logistics, Natural Resources, Telecommunications and Heavy Industries.

AFC is majorly owned by African private investors (55.3% equity of the corporation) with 44.7% owned by the Central Bank of Nigeria.

As of April 2020, AFC has 26 member states which include Nigeria (host country), Benin, Cape Verde, Chad, Côte d’Ivoire, Djibouti, Eritrea, Gabon, Gambia, Ghana, Guinea, Guinea Bissau, Kenya, Liberia, Madagascar, Malawi, Mauritius, Rwanda, Sierra Leone, Togo, Uganda, Zambia and Zimbabwe.

Africa Finance Corporation, to date, has invested over US$ 6.6 billion in infrastructure projects, across 28 African countries.

Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

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Debt Securities

DMO announces May 2021 FGN savings bond offer for subscription

The DMO has announced the offer for subscription of the May 2021 Federal Government Savings Bond to investors.

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The Debt Management Office (DMO), on behalf of the Federal Government has announced the offer for subscription of the May 2021 Federal Government Savings Bond to investors.

This disclosure is contained in a circular issued by the DMO on May 3, 2021, and can be seen on its website noting that there are 2-year and 3-year savings bonds.

A breakdown of the bonds shows that the 2-year FGN savings bond will be due on May 12, 2023, at 7.753% per annum and the 3-year FGN Savings Bond which will be due on May 12, 2024, at 8.753% per annum.

The offer has an opening date of May 3, with a closing date of May 7, while the settlement date is May 12, with the coupon payment dates as follows: August 12, November 12, February 12 and May 12.

The circular also states that the unit of sale is N1,000 per unit subject to a minimum subscription of N5,000 and in multiples of N1,000 thereafter, subject to a maximum subscription of N50,000,000

It also states that the interest is payable quarterly with the redemption expected to be in bullet payment on the maturity date.

In case you missed it

It can be recalled that last month, the DMO on behalf of the Federal Government, offered for subscription April 2021, Federal Government Savings Bond to investors.

The offer consisted of a 2-Year FGN Savings Bond due April 14, 2023, at 5.522% per annum and a 3-year FGN Savings Bond due April 14, 2024, at 6.522% per annum.

The opening date was April 6, 2021, with the closing date on April 9, 2021, settlement date on April 14, 2021, and the coupon payment dates on July 14, October 14, January 14, and April 14.

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Debt Securities

CBN’s N88 billion treasury bill auction yesterday was oversubscribed by 174.62%

At the end of the auction, one-year treasury bills sold for 9.75% per annum.

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Some experts are uncertain of what to expect from money markets in H2 2020

The Central Bank of Nigeria’s (CBN) Treasury Bills Auction worth N88.46 billion was oversubscribed by 174.6% yesterday. The stop rates for the 91 and 182-day tenor bills fixed at 2.00% and 3.50% respectively.

The stop rate of the 364-day tenor bill was pegged at 9.75% according to the result of the NTB auction.

The apex bank recorded N242.94 billion in total subscription, as the treasury bill auction was oversubscribed by 174.62%, however, T-bills worth N88.46 billion were provided across the 91-day, 182-day and 364-day tenors at the primary auction.

At the end of the auction, bills worth about N129.46 billion were allotted to investors.

READ: CBN’s N154.38 billion T-bills auction over subscribed by 46% as rates fall marginally  

Demand for Treasury Bills Surge

Demand for Treasury Bills has surged in recent months as yield-hungry investors scamper away from equities into risk-free government securities. While 2020 was marred with ultra-low interest rates on fixed income securities like Treasury Bills, yields have spiked in recent weeks to the surprise of investors.

With inflation rate galloping past 18% the pressure to flee the naira appears to have forced the central bank to revise its monetary policy strategy, allowing rates to rise.

READ: CBN, First Bank on collision course over removal of MD/CEO

Summary of the NTB Auction today

The 91-day bill was undersubscribed by 7.51% as it received a subscription of N10.53 billion, against an initial offer of N11.39 billion.

The 182-day tenor bill on the other hand performed well, as it was oversubscribed by 50.87% with an impressive subscription of N9.05 billion which was received yesterday, against an offer of N223.35 billion.

The 364-day tenor bill recorded the highest subscription with an oversubscription rate of 214.25%, as investors’ total subscription was valued at N223.35 billion, relative to an initial offer of N71.07 billion.

READ: U.S Government makes a premium selling Bitcoin

The breakdown of the allotment

At the close of the auction yesterday, about N7.19 billion of the 91-day tenor bill was allotted, lower than the initial offer of N11.39 billion, while N6 billion worth of the 182-day bill was allotted to investors.

With the settlement for the bill pegged for the 29th of April 2021, about N116.27 billion of the 364-day tenor bill was also allotted to investors.

The oversubscribed bills confirm the huge demand for risk-free government securities amidst a dearth of sizeable investment funds.

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READ: Bank of England considers digital currency

What you should know

  • The treasury bills were auctioned in a Dutch auction structure, as the price of the offerings were set after bids were received to determine the highest price at which the total offering could be sold.
  • This provided investors with the opportunity to place bids for the amount they were willing to buy in terms of quantity and price.
  • The range of bids was placed at 1.99 and 10.00 for the 91-day tenor; 3.49 and 10.00 for the 182-day tenor, 8.8943 and 15.00 for the 364-day tenor.

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